Make Millions in Tech

Silicon Valley is its own world ("the Valley"), with its own language (geek speak) and its own commerce (ludicrous options grants). That's why many people I know would rather try to eat a gallon of soup with a fork than invest in tech stocks.

But forsaking all tech stocks can be a recipe for subpar returns. Consider Cisco Systems (NASDAQ:CSCO). This tech pioneer, which specializes in the once-esoteric business of networking equipment, delivered mind-blowing returns for early investors. You could have become one of the winners had you done some homework.

Yes, you could have
What homework? Trade magazines such as Network World were a great source of information when tech investments were taking off. Had you been a reader of that particular publication in 1994, you would have learned that Cisco products were helping build the digital communications backbone of the Canadian government. In 1996, you would have learned that Ryder was depending on a Cisco-powered network to keep its trucks in top working condition. And in 1997, you would have learned that Cisco employees loved their jobs so much that they were happily working 60 or more hours per week.

At the same time, had you checked Cisco's annual reports, you would have seen outrageous sales growth:

Investors who seized the momentum in 1994 have seen their original positions increase more than nine times in value. But those who waited till January 1997 are sitting on a better than 270% gain today, which is more than double the market's return over the same time frame.

What about today?
It's tempting to say that the dot-com bubble was a unique time of massive growth and that those days are gone, never to return. But I think that's crazy. Plenty of great tech stocks are available today, and some even look like Cisco did in 1995.

How to find them? Try the same trade magazines that worked back in the day. What you're looking for are technologies that corporate chief information officers (CIOs) are willing to spend big money on. A quick search of "spending priorities" at trade magazine ComputerWorld brought forth this article, which says that data security products and services will continue be a priority in 2007.

Screening for opportunities in this industry isn't too difficult. Here's a list of candidates ranked by three-year annualized sales growth:

Could any of these help you make millions from thousands? Sure. EMC reported huge earnings gains yesterday, thanks in part to its acquisition of data security expert RSA. Meanwhile, Vasco is up 50% over the past year partly because of its innovations in bank data security.

But I'm most interested in Secure Computing, which is an active member of the Rule Breakers portfolio. Why? It's a pioneer in unified threat management, which is geek speak for devices that combine software and hardware.

Specifically, Secure Computing's devices act like sentries, positioned at the edge of networks to identify and swat digital pests before they reach users. That's a massive improvement over a classic software firewall. Mix in the recently acquired CipherTrust technology, which sniffs out and blacklists digital hooligans via a global Web-monitoring network, and Secure Computing seems to me well ahead of its competitors.

Make millions in tech
Learning about the technology industry isn't easy, but the rewards of that studying can be huge. That's why we devote significant time and energy searching for stocks like Secure Computing at Rule Breakers. We think hunting for the next big technological breakthroughs will lead to the highest possible returns.

If you'd like to join us at Rule Breakers, we offer a free 30-day trial. Take us up on our offer, and you'll have free access to all our picks and research, with no obligation to subscribe, for a full month. Click here for more information.

This article was originally published on July 15, 2006. It has been updated.

Fool contributor Tim Beyers owns shares of Secure Computing. Get the skinny on all of Tim's stock holdings by checking his Fool profile. Symantec is a Motley Fool Inside Value pick. Websense is a former Stock Advisor recommendation. The Motley Fool's disclosure policy is a rebel with a cause.